China Digital TV Announces Unaudited Third Quarter 2012 Results

       China Digital TV Announces Unaudited Third Quarter 2012 Results

PR Newswire

BEIJING, Nov. 20, 2012

BEIJING, Nov. 20, 2012 /PRNewswire/ -- China Digital TV Holding Co., Ltd.
(NYSE: STV) ("China Digital TV" or the "Company"), the leading provider of
conditional access ("CA") systems to China's  expanding digital television
market, today announced its unaudited financial results for the third quarter
ended September 30, 2012.

Highlights for the Third Quarter 2012

  o Net revenues in the third quarter of 2012 were US$20.4 million,
    representing a 21.4% decrease from the same period in 2011 and a 13.3%
    decrease from the second quarter of 2012.
  o China Digital TV shipped approximately 3.84 million smart cards in the
    third quarter of 2012, compared to 4.66 million in the same period in 2011
    and 3.74 million in the second quarter of 2012.
  o Gross margin in the third quarter of 2012 was 75.8%, compared to 80.5% in
    the same period in 2011 and 76.4% in the second quarter of 2012.
  o Net loss per American depositary share (one ADS representing one ordinary
    share), or ADS, in the third quarter of 2012 was US$ 0.19, compared to
    diluted earnings per ADS of US$0.17 in the same period in 2011 and US$0.12
    in the second quarter of 2012.

"China Digital TV saw a modest increase in sequential card shipments during
the third quarter 2012 as China's CA market continued to be impacted by delays
from some provincial-level cable operators," said Mr. Jianhua Zhu, China
Digital TV's chairman and chief executive officer. "Our leading position in
China's CA market should enable China Digital TV to continue to benefit from
China's ongoing cable penetration and digitalization as well as the conversion
to high-definition set-top boxes over the next few years. In addition, China
Digital TV continues to make good progress diversifying our product offerings
and developing value-added services and partnership opportunities."

"With provincial network consolidation continuing to move toward completion,
cable operators have initiated a new round of bidding for smart cards," added
Mr. Dong Li, China Digital TV's president. "Following our success winning bids
in Sichuan and Henan during the second quarter 2012, we won bids in Shanxi and
Zhejiang in the third quarter, as well as in locations where we have not
previously been active like Ningxia. As the market leader, we believe that
China Digital TV is well positioned to secure additional contracts during this
new round of bidding."

Mr. Zhenwen Liang, China Digital TV's chief financial officer, commented,
"While our bottom line was impacted by an impairment charge and a withholding
tax related to our recently announced special dividend, these items are
non-recurring and we have confidence in the strength of China Digital TV's
underlying business and operations. We remain optimistic about the long-term
demand in China's CA market."

Third  Quarter 2012 Results

(Note: Unless otherwise stated, all financial statement measures stated in
this press release are based on generally accepted accounting principles in
the United States ("U.S. GAAP").)

In the third quarter of 2012, China Digital TV generated net revenues of
US$20.4 million, a decrease of 21.4% from the third quarter of 2011 and a
decrease of 13.3% from the second quarter of 2012. The year-over-year decrease
in net revenues was principally due to a decrease in the shipment volume of
smart cards. The quarter-over-quarter decrease in net revenues was primarily
due to a decrease in the sales of other products, such as multimedia home
entertainment boxes and surface mounted device chipsets.

In the third quarter of 2012, revenues from the Company's top five customers
accounted for 22.9% of total revenues, compared to 27.8% in the second quarter
of 2012.

Revenue Breakdown

                                          For the three months ended
                                         September 30,  June 30,  September
                                                                  30,
                                         2012           2012      2011
                                         (in thousands of U.S. dollars)
Product:
Smart Cards                              $    18,463    $ 18,209  $    23,327
Other products                                1,158       4,090        1,557
Subtotal                                      19,621      22,299       24,884
Services:
Head-end system                               436         714          628
                   integration
Head-end system                               359         207          214
                   development
Licensing income                              204         445          331
Royalty income                                55          125          181
Other service                                 23          16           3
Subtotal                                      1,077       1,507        1,357
Total revenues                           $    20,698    $ 23,806  $    26,241

Revenues from smart cards and other products were US$19.6 million in the third
quarter of 2012, a decrease of 21.2% from the same period in 2011 and a
decrease of 12.0% from the second quarter of 2012. Sales of smart cards and
other products accounted for 94.8% of total revenues in the third quarter of
2012, compared to 93.7% in the second quarter of 2012. The year-over-year
decrease was principally due to a decrease in the shipment volume of smart
cards. The quarter-over-quarter decrease was primarily due to a decrease in
the sales of other products, such as multimedia home entertainment boxes and
surface mounted device chipsets.

Revenues from services were US$1.1 million in the third quarter of 2012, a
decrease of 20.6% from the same period in 2011 and a decrease of 28.5% from
the second quarter of 2012. Service revenues accounted for 5.2% of total
revenues in the third quarter of 2012. The year-over-year and
quarter-over-quarter decrease were primarily due to decreases in revenue from
head-end system integration, licensing income and royalty income.

Gross profit in the third quarter of 2012 was US$15.4 million, a decrease of
26.0% from the same period in 2011 and a decrease of 14.0% from the second
quarter of 2012. Gross margin, which is equal to gross profit divided by net
revenues, was 75.8% in the third quarter of 2012, compared to 80.5% in the
same period in 2011 and 76.4% in the second quarter of 2012. The
year-over-year decrease in gross margin was primarily due to a decrease in
revenue from smart cards sales. The quarter-over-quarter decrease in gross
margin was mainly attributable to a decrease in revenue from surface mounted
device chipsets, which have a higher gross margin than other products.

In the third quarter of 2012, the average selling price (the "ASP") of smart
cards decreased by 1.1% compared to the second quarter of 2012. In addition,
the unit cost of smart cards increased by 0.3% compared to the second quarter
of 2012.

Operating expenses in the third quarter of 2012 were US$10.4 million, an
increase of 8.7% from the same period in 2011 and a decrease of 1.0% from the
second quarter of 2012.

-- Research and development expenses in the third quarter of 2012 were US$5.0
million, an increase of 26.6% from the same period in 2011 and an increase of
16.7% from the second quarter of 2012. The year-over-year increase was
primarily due to an increase in the number of research and development staff,
which was partially offset by a decrease in share-based compensation expenses
relating to options granted to employees in 2011. The quarter-over-quarter
increase was mainly due to an increase in the number of research and
development staff and project development expenses.

-- Selling and marketing expenses in the third quarter of 2012 were US$3.2
million, an increase of 9.2% from the same period in 2011 and a decrease of
5.5% from the second quarter of 2012. The year-over-year increase was
primarily due to an increase in both the headcount and average salaries of
sales and marketing staff, which was partially offset by a decrease in
marketing expenditures. The quarter-over-quarter decrease was mainly due to a
decrease in marketing expenditures.

-- General and administrative expenses in the third quarter of 2012 were
US$2.2 million, a decrease of 17.5% from the same period in 2011 and a
decrease of 21.8% from the second quarter of 2012. The year-over-year decrease
was primarily due to a decrease in share-based compensation expenses relating
to options granted to employees in 2011, which was partially offset by
an increase in both the headcount and average compensation of general and
administrative staff. The quarter-over-quarter decrease was mainly due to a
decrease in allowance for doubtful accounts.

Income from operations in the third quarter of 2012 was US$5.0 million, a
55.7% decrease from the same period in 2011 and a 32.5 % decrease from the
second quarter of 2012.

Operating margin, defined as income from operations divided by net revenues,
in the third quarter of 2012 was 24.5%, compared to 43.4% in the same period
in 2011 and 31.5% in the second quarter of 2012.

Impairment loss on long-term investments in the third quarter of 2012 was
US$4.5 million. The Company fully accrued an impairment charge of US$4.5
million related to its investment in 3DiJoy Corporation ("3DiJoy"). In May
2010, the Company invested US$6.0 million in 3DiJoy, a provider of
motion-sensing video game solutions for cable set top boxes, PCs and other
consumer electronic devices. As 3DiJoy has consistently failed to achieve
profitability and has been experiencing financial difficulties since early
2012, the Company determined to fully accrue such impairment charge based on
the valuation conducted by a third party valuation firm.

Income tax expenses in the third quarter of 2012 were US$13.6 million,
compared to US$2.5 million in the same period in 2011 and US$1.8 million in
the second quarter of 2012. The year-over-year and quarter-over-quarter
increases were primarily due to an increase in deferred income tax, which was
mainly attributable to the accrual of a US$12.1 million withholding tax
related to the undistributed retained earnings of the Company's subsidiaries
located in PRC as a result of the Company's determination to distribute part
of the undistributed retained earnings of the Company's PRC subsidiaries. The
Company expects to continue accruing and recording withholding tax for
undistributed retained earnings of the Company's PRC subsidiaries in the
foreseeable future.

Net loss attributable to non-controlling interest in the third quarter of 2012
was US$0.4 million, an increase of 9.1% from the same period in 2011 and an
increase of 9.7% from the second quarter of 2012. The year-over-year and
quarter-over-quarter increases were largely due to an increase in net loss
incurred by the Company's majority-owned subsidiaries.

Net loss  attributable to China Digital TV Holding Co., Ltd. in the third
quarter of 2012 was US$11.4 million, compared to a US$10.3 million net income
attributable to China Digital TV in the same period in 2011 and a US$7.1
million net income attributable to China Digital TV in the second quarter of
2012.

Non-GAAP net loss attributable to China Digital TV Holding Co., Ltd.  defined
as net loss excluding certain one time or non-cash expenses, such as
impairment loss on long-term investments, share-based compensation expenses,
amortization of acquired intangible assets from business acquisitions and
equity method investments, in the third quarter of 2012 was US$6.2 million,
compared to a US$12.2 million non-GAAP net income attributable to China
Digital TV in the same period in 2011 and a US$8.0 million non-GAAP net income
attributable to China Digital TV in the second quarter of 2012. For more
information on these non-GAAP financial measures, please see the table
captioned "Reconciliation of non-GAAP measures" set forth at the end of this
release.

Balance Sheet and Cash Flow

As of September 30, 2012, China Digital TV had cash and cash equivalents, and
restricted cash totaling US$191.6 million. In the third quarter of 2012, cash
flow generated from operations was approximately US$10.4 million.

Special Cash Dividend

On November 12, 2012, China Digital TV declared a special cash dividend
equivalent to US$2.30 per ADS (each ADS representing one ordinary share, par
value US$0.0005 per share). The special dividend is expected to be paid in two
installments of US$1.00 and US$1.30 on or around December 3, 2012 and February
4, 2013, respectively.

Business Outlook

Based on information available as of November 20, 2012, China Digital TV
expects smart card shipment volume for the fourth quarter of 2012 to be in the
range of 3.6 million to 3.9 million. Net revenues for the fourth quarter of
2012 are expected to be in the range of US$ 19.3 million to US$ 20.9 million.

Conference Call Information

The Company will hold an earnings conference call at 7:00 p.m. on Tuesday,
November 20, 2012, U.S. Eastern Time (8:00 a.m. on Wednesday, November 21,
2012, Beijing/Hong Kong Time).

Conference Call Dial-in Information

United States Toll Free:             +1-866-519-4004
International:                       +65-6723-9381
           
Hong Kong:                           +852-2475-0994
             
China Toll Free:                     +400-620-8038 and +800-819-0121       
                                               
Passcode:                            China Digital TV Earnings Call

Please dial-in ten minutes before the call is scheduled to begin and provide
the passcode to join the call.

A replay of the call will be available for one week between 10:00 p.m. on
November 20, 2012 and 11:59 p.m. on November 27, 2012 U.S. Eastern Time.

Replay Information

United States:                             +1-718-354-1232
International:                             +61-2-8235-5000
Conference ID:                             58700122

In addition, a live and archived webcast of this conference call will be
accessible through the Investor Relations section of China Digital TV's
website at http://ir.chinadtv.cn.

Safe Harbor Statements

This announcement contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended.  Such forward-looking statements
are made under the "safe harbor" provisions of the U.S. Private Securities
Litigation Reform Act of 1995.

These forward-looking statements can be identified by terminology such as
"will," "expects," "anticipates," "future," "intends," "plans," "believes,"
"estimates," "may," "should" and similar expressions. Such forward-looking
statements include, without limitation, statements regarding the outlook for
the fourth quarter of 2012 and comments by management in this announcement
about trends in the CA systems, digital television, cable television and
related industries in the PRC and China Digital TV's strategic and operational
plans and future market positions. China Digital TV may also make
forward-looking statements in its periodic reports filed with the U.S.
Securities and Exchange Commission, in its annual report to shareholders, in
press releases and other written materials and in oral statements made by its
officers, directors or employees to third parties. Statements that are not
historical facts, including statements about China Digital TV's beliefs and
expectations, are forward-looking statements. Forward-looking statements
involve inherent risks and uncertainties. A number of factors could cause
actual results to differ materially from projections contained or implied in
any forward-looking statement, including but not limited to the following:
competition in the CA systems, digital television, cable television and
related industries in the PRC and the impact of such competition on prices,
our ability to implement our business strategies, changes in technology, the
progress of the television digitalization in the PRC, the structure of the
cable television industry or television viewer preferences, changes in PRC
laws, regulations or policies with respect to the CA systems, digital
television, cable television and related industries, including the extent of
non-PRC companies' participation in such industries, and changes in political,
economic, legal and social conditions in the PRC, including the government's
policies with respect to economic growth, foreign exchange and foreign
investment.

Further information regarding these and other risks and uncertainties is
included in our annual report on Form 20-F and other documents filed with the
U.S. Securities and Exchange Commission. China Digital TV does not assume any
obligation to update any forward-looking statements, which apply only as of
the date of this press release.      

About China Digital TV

Founded in 2004, China Digital TV is the leading provider of CA systems to
China's expanding digital television market. CA systems enable television
network operators to manage the delivery of customized content and services to
their subscribers. China Digital TV conducts substantially all of its business
through its PRC subsidiary, Beijing Super TV Co., Ltd., and its affiliate,
Beijing Novel-Super Digital TV Technology Co., Ltd., as well as subsidiaries
of its affiliate.

For more information please visit the Investor Relations section of China
Digital TV's website at http://ir.chinadtv.cn. The information contained in
that website is not a part of this announcement.

For investor and media inquiries, please contact:

In China:

Nan Hao
China Digital TV
Tel:   +86-10-6297-1199 x 9780
Email: ir@chinadtv.cn

Josh Gartner
Brunswick Group
Tel:   +86-10-5960-8600
Email: chinadigital@brunswickgroup.com

In the US:

Patricia Graue
Brunswick Group
Tel: +1-415-671-7676
Email: chinadigital@brunswickgroup.com 

 

China Digital TV Holding Co., Ltd.
Unaudited Consolidated Statements of Comprehensive Income
 (in thousands of U.S. dollars, except share and per share data )

 
                                     For the three months ended
                                    September 30,  June 30,      September 30,
                                    2012           2012          2011
Revenues
Products                            $  19,621      $ 22,299      $  24,884
Services                               1,077         1,507          1,357
Total revenues                         20,698        23,806         26,241
    Business taxes                     (341)         (324)          (354)
Net revenues                           20,357        23,482         25,887
Cost of Revenues
    Products                           (3,901)       (4,587)        (4,227)
    Services                           (1,030)       (963)          (811)
Total Cost of Revenues                 (4,931)       (5,550)        (5,038)
Gross Profit                           15,426        17,932         20,849
Operating expenses
    Research and development           (4,960)       (4,249)        (3,919)
expenses
    Selling and marketing expenses     (3,241)       (3,429)        (2,968)
    General and administrative         (2,241)       (2,865)        (2,717)
expenses
Total Operating Expenses               (10,442)      (10,543)       (9,604)
Income from operations                 4,984         7,389          11,245
    Interest income                    1,343         1,676          1,723
    Interest expense                   -             (195)          (544)
    Gain (loss) from forward           -             (125)          242
contract
    Impairment loss on long-term       (4,487)       -              -
investments
    Other income / (expense)           170           75             (28)
Income before income tax               2,010         8,820          12,638
Income tax benefits / (expenses)
    Income tax-current                 (1,718)       (1,982)        (2,778)
Income tax-deferred                    (11,899)      176            258
Net income/(loss) before net loss                                    
from equity method investments
                                       (11,607)      7,014          10,118
Net loss from equity method            (235)         (253)          (250)
investments
Net income/(loss)                      (11,842)      6,761          9,868
Net loss attributable to               418           381　          383
noncontrolling interest
Net income/(loss) attributable to                                    
China Digital TV Holding Co., Ltd   $              $             $
                                       (11,424)      7,142          10,251
Net income/(loss) per share
attributable to ordinary
shareholders of China Digital TV
Holding Co., Ltd
Basic                               $  (0.19)      $ 0.12        $  0.17
Diluted                             $  (0.19)      $ 0.12        $  0.17
Net income/(loss)                   $  (11,842)    $ 6,761       $  9,868
Other comprehensive income (loss),
net of tax
                                       1,416         (2,043)　      3,487
    Foreign currency translation
adjustment
                                                      
Comprehensive income/(loss)                                         13,355
                                       (10,426)      4,718
Comprehensive loss attributable        385           415            383
to   noncontrolling interest
Comprehensive income/(loss)                           
attributable to ordinary
shareholders of China Digital       $              $             $  13,738

TV Holding Co., Ltd                    (10,041)      5,133
 

 

 

Weighted average shares used in
calculating net income/(loss) per
ordinary share
Basic                                  59,004,438    58,999,695     58,966,799
Diluted                                59,004,438    59,091,468     59,088,020

 

China Digital TV Holding Co., Ltd.
Unaudited Consolidated Balance Sheets
 (in thousands of U.S. dollars)
ASSETS                                             September 30,  December 31,
                                                   2012           2011
Current assets:
    Cash and cash equivalents                      $    191,429   $    201,557
    Restricted cash                                     154            55,679
    Notes receivable                                    4,134          9,168
    Accounts receivable, net                            35,205         31,030
    Inventories                                         5,715          3,918
    Prepaid expenses and other current assets           4,653          6,768
    Deferred costs - current                            368            524
    Deferred income taxes - current                     1,551          1,352
Total current assets                                    243,209        309,996
    Property and equipment, net                         1,631          1,751
    Intangible assets, net                              260            450
    Goodwill                                            542            541
    Long-term investments - equity method               4,032          7,766
    investments
    Deferred costs-non-current                          272            379
    Deferred income taxes - non-current                 546            455
Total assets                                       $　  250,492   $　  321,338
LIABILITIES AND EQUITY
Current liabilities
    Short-term loan                                $    -         $    55,193
    Accounts payable                                    1,918          1,487
    Accrued expenses and other current                  11,873         9,313
    liabilities 
    Dividend payable                                    80             33,172
    Deferred revenue – current                          7,678          7,745
    Income tax payable                                  1,046          1,902
    Deferred income taxes - current                     12,127         -
Total current liabilities                               34,722         108,812
    Deferred revenue-non-current                        167            401
    Government subsidies                                1,828          1,803
Total Liabilities                                       36,717         111,016
EQUITY
China Digital TV Holding Co., Ltd. shareholders'
equity:
    Ordinary shares                                     30             29
    Additional paid-in capital                          129,078        126,583
    Statutory reserve                                   17,694         17,694
    Retained earnings                                   39,085         36,401
    Accumulated other comprehensive income              24,868         25,735
Total China Digital TV Holding Co., Ltd                 210,755        206,442
shareholders' equity
Noncontrolling interest                                 3,020          3,880
Total equity                                            213,775        210,322
TOTAL LIABILITIES AND EQUITY                       $    250,492   $    321,338

Reconciliation of Non-GAAP Measures

Non-GAAP net income (loss) attributable to China Digital TV Holding Co., Ltd.
shareholders excludes certain one-time or non-cash expenses, such as
impairment loss on long-term investments, share-based compensation expenses,
amortization of intangible assets acquired from business acquisitions and
equity method investments. The Company believes that the non-GAAP net income
(loss) provides meaningful supplemental information regarding the Company's
performance and liquidity by excluding certain one-time or non-cash expenses
that may not be indicative of its operating performance from a cash flow
perspective. The Company believes that both management and investors benefit
from referring to this additional information in assessing the Company's
performance and when planning and forecasting future periods.

                                        For the three months ended  
                                        September 30,  June 30,  September 30,
                                        2012           2012      2011
                                        (in thousands of U.S. dollars)
Net income/(loss) attributable to
China Digital TV Holding Co., Ltd –     $   (11,424)   $  7,142  $    10,251
GAAP
Share-based compensation expenses           646           773         1,861
Amortization of intangible assets from
business acquisitions and equity            88            88          87
method investments
Impairment loss on long-term                4,487         -           -
investments        
Net income attributable to China        $   (6,203)    $  8,003  $    12,199
Digital TV Holding Co., Ltd – Non-GAAP

SOURCE China Digital TV Holding Co., Ltd.

Website: http://ir.chinadtv.cn